The risks and rewards of social media

Facebook, Twitter and other social media websites have been a fact of life for nearly a decade. Everyone from high-school students to retirees uses the sites to keep in touch with friends, network with colleagues and talk about their personal lives. Even as social media became an integral part of many companiesí strategies for finding new customers, interacting with clients, and marketing products and services, many legal departments lagged behind in considering how it could impact their clientsí risk profiles.

But with a series of aggressive actions over the past several years, the National Labor Relations Board (NLRB) shone a spotlight on the need for legal departments to catch up to the changing times fast. Following the board’s 2010 decision in In re: Hispanics United of Buffalo, which established that employees’ chatter on Facebook about dissatisfaction at work could be a protected activity, the board’s acting general counsel, Lafe Solomon, set a sweeping agenda with a series of actions aimed squarely at challenging companies’ social media policies. And the board isn’t waiting for companies to use the policies to terminate or discipline workers. It is proactively challenging employers’ policies even before they’re put into effect.

“There’s a good likelihood that your social media policy will be subject to review by the NLRB, and you have to draft it with that in mind,” says Brian Hayes, a shareholder at Ogletree, Deakins, Nash, Smoak & Stewart, and a former NLRB member. “The [acting] general counsel has repeatedly found where policies are ambiguous, they run afoul of the [National Labor Relations Act] (NLRA). Any ambiguities will be construed against the employer.”

The reach of this scrutiny has quickly expanded well beyond the realm of unionized workplaces. For instance, a fairly standard nondisparagement clause in an employment contract that instructed employees not to “publicly criticize, ridicule, disparage or defame the Company” landed Quicken Loans Inc. in hot water. In a January decision, the board found that Quicken’s policy unlawfully restricted employees’ rights to discuss the terms and conditions of their employment. Likewise, a board administrative law judge (ALJ) found Dish Network Corp.’s employee handbook, which prohibited employees from engaging in “negative electronic discussion” while on the clock, was an unlawful restraint on organizing activities.

Labor and employment lawyers nationwide expect the NLRB to continue to take an aggressive stance on policies that may hamper employees’ ability to discuss the workplace on social media sites. But the NLRB’s barrage of lawsuits may prove to be only the opening salvo in a much larger war. A host of other regulatory agencies are challenging the way companies are using social media and, taking a cue from the NLRB, the plaintiffs bar is poised to employ several new theories to take employers to court over their use or regulation of employees’ social media.

Tree of Knowledge

Social media can provide a wealth of information about employees and applicants, but is it information employers want to know?

When he started his job as an auditor in the inspector general’s office at the U.S. Library of Congress, Peter TerVeer had a great relationship with his boss, John Mech. So much so, in fact, that Mech tried to set TerVeer up on a date with his daughter. TerVeer didn’t tell Mech that he was gay. But when Mech’s daughter added TerVeer as a friend on Facebook, she quickly noticed that he’d “liked” a page called “TwoDads.us,” which focuses on issues facing same-sex parents. TerVeer’s relationship with his boss rapidly went downhill. According to a lawsuit filed on his behalf in August 2012, TerVeer was subjected to persistent anti-gay comments and was eventually fired. The suit alleges discrimination and retaliation.

The case demonstrates the dangers employers face when seeking out workers’ social media pages. Although most employers know they could get into hot water if they ask a job applicant about her age, medical conditions, sexual orientation or ethnic background, many don’t stop to consider the risks they face if they inadvertently learn the same information by screening the applicant’s Facebook page.

“There’s all kinds of information you can get online that you couldn’t ask for in an interview,” says James Walters, a partner at Fisher & Phillips. “Once the employer has that information and makes an adverse decision, it can be brought up in an [Equal Employment Opportunity Commission] (EEOC) charge to show the employer’s knowledge of the protected characteristic.”

Indeed, many state legislatures are troubled by what they see as invasions of employees’ privacy and are taking action to prevent employers from using workers’ or applicants’ social media to make employment decisions. California, Illinois, Maryland and Michigan have passed laws barring employers from demanding social media passwords and account information from applicants and employees. Twelve other states, including Connecticut, Texas and Oregon, are considering similar legislation. A federal bill styled as the “Social Networking Online Protection Act,” introduced in February, would prohibit employers from requesting employees or applicants to disclose usernames or passwords for social media or personal email accounts and would make it illegal to take adverse employment actions based on workers’ refusal to turn over such information.

Even where the law is silent on the legality of reviewing an employee’s social media, employers expose themselves to risks if they do so. Several states prohibit employers from discriminating against employees for legal off-duty conduct, such as smoking. Such laws could extend to prohibit actions taken on the basis of information learned from photos posted online that depict unprofessional (but otherwise legal) conduct. Moreover, New York and several other states make it illegal to discriminate against an employee based on his political views. Anytime an employer gains knowledge of an employee’s political leanings, it runs the risk of a lawsuit when it takes an adverse action.

“Employers need to make an educated decision,” says Ken Yerkes, a partner at Barnes & Thornburg. “Is getting this information helpful? And is it so helpful that it’s worth the risk that they expose themselves to?”

Regulatory Response

An array of federal regulators is gearing up to challenge companies’ use of social media.

While the NLRB continues to grab the lion’s share of headlines for its aggressive stance on social media policies, several other federal regulators have been quietly announcing plans to begin paying more attention to how companies use social media to reach customers and the general public.

In March, the Federal Trade Commission (FTC) issued new regulations applying its long-standing deceptive advertising rules to the specific context of Facebook updates, Twitter posts and “Pins” on Pinterest.

“When you see a testimonial or endorsement in traditional media, such as a television ad, you see the fine print at the bottom of the screen saying this is a paid endorsement, and everyone knows that such disclosures are required,” says Michael Schmidt, a member at Cozen O’Connor. “But there was little guidance regarding what companies need to disclose when an employee sends out a Facebook post about a product offered by the company.”

It turns out that the FTC will be requiring a lot. The new regulations make clear that it is insufficient to place advertising disclosures at the bottom of a corporate webpage. In the context of space-constrained posts such as Tweets and Facebook status updates, the agency warns that posting a disclaimer in a subsequent message or a truncated link is inadequate. The agency places the onus on companies to figure out how to encourage consumers to view the disclosures, including considering how the disclosures will appear in different browsers and devices. A disclosure that may be sufficient on a desktop computer, for example, may be insufficient for a mobile phone if the user would have to scroll to a separate column to view the information on the company’s website. Likewise, the regulations instruct that companies should “consider empirical research about where consumers do and do not look on a screen” and review their web traffic to determine whether consumers are actually clicking through to view hyperlinks containing relevant disclosures.

The global reach of social media presents another regulatory challenge. “Companies need to know whether they can limit where information is going to be posted and accessible,” Yerkes says. “Something that would be legal in one country might be subject to totally different rules elsewhere. When you create an app or social media site, you have to be absolutely certain that it comports with the law of every country where it will be accessible.”

Financial companies face an additional layer of complexity with agencies including the Consumer Financial Protection Bureau (CFPB), the Federal Financial Institutions Examination Council (FFIEC), and the Financial Industry Regulatory Authority (FINRA) all issuing statements concerning companies’ use of social media to discuss products and services with consumers.

FINRA’s regulations focus on the need for regulated financial services companies to retain data regarding information they share online in the event there is a later complaint. Meanwhile, the FFIEC and CFPB hone in on the necessity for companies to implement social media policies to monitor and manage their risks.

“It’s so easy for companies using social media to disclose and talk about things that used to be tightly controlled before they were disclosed to the public,” Schmidt says. “But agencies are becoming increasingly vigilant about applying their existing rules to what a company can and can’t say in this new context.”

Even the rare company that stays off the web isn’t off the hook. The FFIEC draft regulations warn that financial institutions should be prepared to address the potential impact of negative comments on social media platforms, even if they don’t post to social media themselves.

New Era

The wealth of information stored in social media accounts continues to transform the litigation landscape, leaving employers with a host of thorny, unanswered questions.

For decades, most employment discrimination lawsuits boiled down to he-said, she-said battles, with an employee claiming she was damaged by discriminatory conduct and an employer claiming it had legitimate business reasons for its decisions. The wealth of information stored on social media is transforming how litigants prove their cases. Employees’ social networking sites may leave an extensive digital paper trail spread across the Internet.

“Some people will put astonishing things on the Internet,” says Richard Greenberg, a partner at Jackson Lewis. “For instance, there have been cases where an employee is claiming emotional distress related to their termination, but they have series of posts on Facebook saying how much they love being on unemployment.”

Defendants seeking to tap into those sources of information to disprove ex-workers’ discrimination claims got a boost in February when a Colorado district court ruled in EEOC v. The Original Honeybaked Ham Company of Georgia that plaintiffs in a class action lawsuit had to turn over the passwords to their social media accounts for review by a special master. The court also sanctioned the EEOC for causing unnecessary delays in the defendants’ ability to obtain information from workers’ personal accounts. (For more on this case see “The E-discovery Landscape,” p. 48)

But as promising as social media discovery is, employers are quickly learning that such discovery cuts both ways. Just as an employee’s Facebook posts may undermine her claims of emotional distress, a supervisor’s incriminating messages sent from a private Facebook account may implicate the employer. Both sides in any dispute have to contend with the increased time and expense of collecting, reviewing and producing such data.

Experts also expect social media to complicate drafting and litigation of noncompete and nonsolicitation agreements. In the past, it wasn’t difficult for an employer to define what conduct it was seeking to limit if it entered into a nonsolicitation agreement with an employee. Social media accounts have muddied the waters.

“If you’re bound by an agreement not to solicit customers, it’s clear that you can’t call customers and ask them to come with you,” Schmidt says. “But what if you’re connected to customers on LinkedIn and change your profile to show you’re working somewhere new. Is that solicitation?”

In the near future, pending claims will challenge the boundaries of what employee conduct will be treated as protected concerted activity. In In re: Triple Play Sports Bar, the full NLRB will review an ALJ’s finding that the bar unlawfully terminated employees for discussing tax-withholding practices on Facebook. One of the discharged worker’s only participation in the conversation was clicking the “like” button on another employee’s post.

“The case will be the first example of the board applying traditional labor law principles to the actual technology of social media,” says Brian Kurtz, a partner at Ford Harrison.

Such questions leave employers grappling with a new reality: one in which they ultimately have a limited ability to control what information appears on the web.

“There’s some things you need to just live with,” Walters says. “One employee calling a supervisor a bad name and getting a ‘like’ from another employee could probably be construed as concerted activity, and that person can’t be summarily fired for it. You can’t try to right every wrong statement on the Internet.”